2015 (10) TMI 1625 - AT - Income Tax

Benami transaction - Addition made on account of income from M/s.Chandan Carrier - Held that - In the instant case, the AO made addition of ₹ 1,07,890/- being income from M/s.Chandan Carriers, holding the assessee as benami of his brother-in-law Shri Nilesh Shah. Considering the contention of the assessee that he has shown income from truck under section 44AE of ₹ 2,01,000/- which includes income of ₹ 1,07,890/- from M/s.Chandan Carriers, and therefore, no separate addition of ₹ 1,07,890/- is warranted none of the lower authorities has verified this contention of the assessee. Further, the contention of the assessee that he has transferred the trucks owned by him to his brother-in-law, Shri Nilesh Shah, as it had started new business of agriculture products, is not substantiated with any evidence as to how and on what terms, the same was transferred and what is the consideration received. Therefore, this contention has been rightly rejected by the lower authorities. However, we are of the considered view that it shall be in the interest of justice to restore the matter back to the file of the AO to verify whether income from trucks shown at ₹ 2,01,000/- under section 44AE by the assessee in the return of income include income from M/s.Chandan Carriers. If so, no further addition of ₹ 1,07,890/- to the income of the assessee is required. We, therefore, set aside the orders of the lower authorities on this issue and restore the matter back to the file of AO to re-adjudicate the issue afresh - Decided in favour of assessee for statistical purpose.

Summary

Issues:
1. Changing the head of income from capital gain to business.
2. Addition made on account of income from M/s. Chandan Carrier.

Issue 1 - Changing the head of income from capital gain to business:
The appeal was filed against the order of the CIT(A)-II, Baroda, regarding the reworking of income based on the duration of shareholding. The appellant contested the direction to treat shares held for less than one month as business income and those held for more than one month as short-term capital gains. During the hearing, the appellant withdrew this ground of appeal, leading to its dismissal.

Issue 2 - Addition made on account of income from M/s. Chandan Carrier:
The AO observed that the appellant diverted income through M/s. Chandan Carrier to evade taxes. The appellant claimed that the transportation business was closed in January 2005, and the tankers were given to a relative for his transportation business. The CIT(A) rejected this claim, stating that no evidence was provided to prove the relative's legal competence to run the business. The appellant argued that the income from M/s. Chandan Carrier was already included in the return under section 44AE, preventing double taxation. The Tribunal found that the lower authorities did not verify this claim and remanded the matter to the AO for reevaluation. The Tribunal directed the AO to confirm if the income from M/s. Chandan Carrier was part of the declared income, potentially avoiding additional taxation. Consequently, the appeal was partly allowed for statistical purposes.

In conclusion, the Tribunal addressed the issues of changing income classification and the addition of income from M/s. Chandan Carrier. The decision highlighted the importance of verifying income declarations and preventing double taxation, ultimately remanding the case for further assessment.